First Things First takes hit in final act of special session

Arizona lawmakers wrapped up their seventh special session March 16 but not before stripping a voter-approved program aimed at expanding education and health services for children.

Lawmakers approved most of the budget bills last week that adjusted for staggering revenue shortfalls in fiscal 2010 and fixed the deficit in fiscal 2011.

All told, the budget for fiscal 2011 cuts more than $1 billion in state spending.

The budget includes a contingency plan that will reduce an additional $862 million if voters reject a temporary one-penny sales tax increase in May.

The Legislature officially adjourned the special session at 2:53 p.m.

The Senate passed HCR2001, which eliminates the tobacco tax-funded First Things First and redirects its money to the state’s coffers, by a vote of 17-13.

But the Senate leadership ultimately skipped voting on another revenue-generating option, H2013, because they couldn’t marshal the support to pass it.

That bill would have repealed a tax credit to businesses for sales tax accounting and reporting expenses, which would have brought in $20 million to the state.

The measure is subject to the requirements of Proposition 108, which requires a two-thirds vote for any act that results in a net increase in state revenues.

Not all 18 Republican senators were in favor of the measure and while some Democrats indicated they would support it, it wasn’t enough to get it out of the Senate.

Senate President Bob Burns said policymakers do not have to fill that budget hole.

“We have a buffer,” he said, referring to the $93 million that remains in the fiscal 2011 budget after accounting for revenues, reductions and expenditures.

H2013 and HCR2001 were the last pieces of a 15-measure budget package that aims to close a $3.4 billion deficit in fiscal years 2010 and 2011.

The Senate had postponed voting on HCR2001 on March 11 and March 15 because of missing members.

Sen. Carolyn Allen, a Republican from Scottsdale, was absent on March 11.

Then on March 15, Sen. Frank Antenori, a Republican from Tucson, was absent.

Antenori said he attended a meeting by the Pima County Board of Supervisors for his House replacement on March 16, and he didn’t want to drive to Phoenix the day before just to drive back to Tucson for the hearing.

Antenori was recently appointed to the Senate, leaving a vacancy in the House, where he was originally elected to.

Antenori said he had told the Senate leadership he would be absent.

Both Allen and Antenori voted for HCR2001 on March 16.

But it turned out the Senate had one more vote than the 16 hands required to pass the bill.

Sen. John Huppenthal, a Republican from Chandler who had indicated he would be opposing the measure, eventually supported it.

Huppenthal had complained he didn’t think the measure, as currently drafted, would pass at the ballot.

“The fact that we are taking every single penny, I have a little bit of problem with that. You had a major initiative there, and we are just seeking to nuclear-bomb it,” he had said to the Arizona Capitol Times.

In explaining his eventual “yes” vote, he said he still has problems with the measure’s language but he hopes that its passage by the Legislature would spur negotiation between First Things First and policymakers for a compromise.

“This is out, so First Things First is going to have to come to the table and address the bureaucracy issues, too,” Huppenthal said, referring to complaints by some colleagues that its board created another layer of government bureaucracy instead of all of the tobacco-tax money going directly to services for children.

Legislators had been eyeing the Early Childhood Development and Health Board — also known as First Things First — since last year after learning it had stockpiled hundreds of millions of dollars since 2006, when voters approved Proposition 203, the initiative that led to its creation.

Burns suspected that a negotiation might take place. He said the Legislature’s vote on HCR2001 puts lawmakers in a better position if they chose to negotiate with the board, but it’s still up to lawmakers to decide whether to do so or not.

“It could go all the way from First Things First going away completely. The money stream would be the thing that would be negotiated possibly amongst members,” Burns said. “We could negotiate where the money would end up going and not have the additional bureaucracy that has been created by First Things First. That’s an option.”

The board had offered to loan its money to the state to help balance the budget deficit.

In a statement, the board said the loan offer has been on the table since December of last year. The board also emphasized that approval by voters would be needed for its money to be used to help with the budget crisis because the law that created it prohibits using the board’s money to replace funds that have been cut from state programs.

“We are hopeful that a loan agreement can be reached. If legislative leaders are unwilling to accept a loan, then the current measure – to eliminate First Things First – will go to the voters,” said Steven Lynn, the board’s chairman. “Voters created this initiative, they approved it in 2006, and we have every reason to believe that they will uphold their commitment to Arizona’s youngest children in November.”

The program is designed to provide early-development and basic health care-screening programs for children under the age of five.

Proposition 203 had established an 80 cents-per-pack tax on cigarettes sold in the state to pay for such programs.

As expected, the March 16 vote on HCR2001 hewed closely along partisan lines. Democrats balked at the measure while Republicans supported it.

Sen. Jay Tibshraeny, a Republican from Chandler, voted against HCR2001. He did not explain his vote on the floor.

Democrats criticized the measure by saying there are alternatives to eliminating First Things First and raiding its money.

Senate Minority Whip Linda Lopez, a Democrat from Tucson, called it “stealing.”

“The Legislature did not have the courage to do the right thing and raise revenue to help prevent this kind of action,” she said. “The Legislature is stealing the money that the voters of the state of Arizona have said they want provided to young children and their families.”

But Sen. Ron Gould, a Lake Havasu Republican, said it’s not theft.

“We are giving the voters an opportunity to have a redo on this to see whether they really want to confirm what they did after they have information on how the group has implemented the plan,” Gould said.

Gould outlined a recurrent complaint among conservative Republicans against First Things First — that it created a bureaucracy and that it accumulated hundreds of millions of dollars and did not spend any of it for children’s programs until a Senate panel began investigating where its money was going.

Allen, the chairwoman of the Senate Health Accountability and Reform Committee, said she had warned the group about this day.

“Guys, I told you and you did not listen,” she said.

Allen read a letter she wrote last year criticizing the First Things First Board for hesitating to help mitigate then a brewing crisis in the child care industry.

Last year, the Legislature had cut in half the general fund allocation for the health department’s Division of Licensing Services and gave the agency the authority to increase its licensing fees to make up for the reduction. The resulting proposed license fee increases were going to hit the child care industry hard.

Will Humble, director of the Department of Health Services, had asked for help from First Things First, requesting a grant or scholarship from the fund that the board controls. He failed to persuade board members to do so.

Elliott Hibbs, former executive director of First Things First, then explained that that its money should not be diverted away from the purposes for which the program was created. He said state law does not permit the money to be used to supplant state funding.

Allen had noted that the board was missing out on an opportunity to act on something that was line with its mission and was putting its future in jeopardy.

The board, she noted, should be cautious about leaving families and child care centers “out to dry or I could see this going back to the ballot and letting the voters decide.”